BOX 1.1

Coal Price Trends

In contrast to price trends for natural gas and oil, which are broadly similar for the period 1949-2005, the price of coal has been much less volatile and has followed a different trajectory (Figure 1.1). A period of decreased coal mine productivity in the mid-1970s, in response to a more constrained regulatory environment, was followed by a long period of decreasing prices resulting from a two- to three-fold increase in productivity. This dramatic productivity increase was largely due to an upsurge in production from large surface mines in the West as well as the consolidation of small mines and the adoption of longwall mining in underground mines in the East. On a constant-dollar basis, the price of coal in 2005 was less than half the price of coal in 1975. On a heating-value basis, oil and gas were several times more expensive than coal in 2005, giving coal a significant price advantage over the competing fossil fuels for use in generating electricity.

FIGURE 1.1 Fossil fuel production prices for 1949-2005. ‘Chained Dollars’ are calculated to express real prices relative to a particular reference year (2000 in this case), based on the purchasing power of goods and services in successive pairs of years. SOURCE: EIA (2006a).

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